Traditionally, litigation has been viewed as a costly necessity. In today’s complex financial landscape, litigation is no longer just a cost center, it’s emerging as a dynamic investment tool across fund types. This series explores how legal strategies are being used to drive returns, unlock hidden value, and reshape how capital is deployed across distressed debt, private equity, and real estate.
Litigation in Distressed Markets
In distressed markets, litigation can transform risk into opportunity. Beyond simple enforcement, investors are using lawsuits to accelerate repayment, seize collateral, and force settlements that turn impaired instruments into high-yielding assets. Bankruptcy litigation adds another layer, with claims such as fraudulent conveyance, preference actions, or director liability often overlooked or mispriced. By acquiring these positions, funds can extract value that others miss or even gain control of undervalued companies and hard assets at a discount. What was once seen as a liability has become a deliberate mechanism for alpha generation.
Litigation in Private Equity
In private equity, litigation is increasingly a lever for portfolio value creation. Funds may underwrite or finance claims that portfolio companies cannot pursue on their own, whether for breach of contract, IP infringement, or antitrust violations. This not only recovers lost value but can create entirely new revenue streams. Litigation can also help resolve shareholder disputes or regulatory challenges that otherwise depress valuations, cleaning up companies ahead of exit. In some cases, litigation funding provides a pathway to greater influence—securing board representation or partial control when claims are material to a company’s worth.
Litigation in Real Estate
In real estate, litigation has evolved into a sophisticated acquisition and value-creation tool. The most established model is distressed credit: purchasing non-performing loans at a discount, enforcing covenants, and using foreclosure to secure properties below market value. But funds are also leveraging legal tactics in more opportunistic ways, through quiet-title actions that clear ownership disputes, easement enforcement to maximize property utility, or even “hostile takeovers” where control is obtained via junior liens or mezzanine debt. These strategies not only reduce entry costs but also accelerate acquisition timelines, broaden deal flow, and capture inefficiencies that traditional buyers cannot access.
Conclusion
Litigation, far from being a last-resort hammer, can serve as a refined scalpel in the toolkit od modern real estate funds. Whether deployed in distressed debt, private equity, or real estate, legal strategies are helping investors gain leverage, expand opportunities, and generate non-correlated returns in an uncertain market.
Read the full series here.
